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HR in Germany

01 Jun 2007

The labour market and subsequent HR policies in Germany have two strong identifying features: firstly, well developed labour laws regarding retirement, redundancies and working hours which set the framework for HR management; secondly, strong labour unions exercise significant political influence on companies and the workforce. The labour market challenges facing Germany are less unique. In 2006, the Association of German Chambers of Industry and Commerce (Deutscher Industrie und Handelskammertag, DIHK) published the results of a study on firms' demand for skilled workers. The survey revealed that 16% of responding companies cannot fill vacant positions with appropriate candidates, despite the persistently high levels of unemployment. The DIHK's study showed that recruiting appropriately skilled staff was particularly difficult for companies in sectors in which employment is expected to expand. In the pharmaceutical sector, around 30% of companies could find suitable candidates to fill their vacancies. One in four firms involved in the manufacture of machinery and equipment reported a skills shortage, a result echoed in the information and communication services sectors. In addition, larger firms appear to be more affected by skills shortages than smaller ones. Not surprisingly, the same holds true for firms in regions where the unemployment rate is relatively low. Providing more training remains the most common response for those companies threatened by skills shortages, however, recruiting appropriately skilled employees from abroad remains a low priority option for most companies. Short term solutions to the skills crisis include increasing the number of employers offering flexible working arrangements - in an attempt to attract women to their workforces who are looking for better work-life balance. A recent Organisation for Economic Co-operation and Development (OECD) report, titled Ageing and Employment Policies, also revealed that many Germans stop working well before reaching the statutory retirement age of 65 years. As a result, only two out of five people in Germany between the ages of 55 and 64 years are employed, well below the ratio of most other OECD countries. For example, about three out of five people in this age group are still active in Britain and the US and more than 70% in Sweden. The government has been slow to introduce measures to encourage older workers to remain at work; however, policies are now filtering through. The OECD warned that policy reform needs to continue if Germany is to hold onto its position as Europe's economic leader. Germany At A Glance Talent challenges and strategies Shrinking talent pool: While the demand for skilled workers remains high, Germany is experiencing a declining Industry (25.9%) Labour force by sector population. It is estimated that an additional two million workers will be required by 2020. Like other Agriculture (2.2%) European nations, Germany is also facing a 'brain drain' as young workers move abroad for work experience. Germany has recently initiated a range of strategies and incentives to promote education and learning in the region and encourage young talent to settle or remain in the country. Ageing workforce: Recommendations have been made by the OECD to raise the retirement age from 64 to 67

Population Labour force

82.3 million 43.32 million Services (71.9%)

years - in line with rising life expectancy. The OECD also recommends the introduction of job search requirements for all, irrespective of age. Incentives to retire before the official retirement age or to withdraw from the labour market by taking advantage of disability pensions or unemployment benefits combined with exemptions from job search requirements should be removed. Every person registered as unemployed should be required to look for a job. The OECD concluded that training programs for older workers, especially for the low- and medium-skilled, are urgently needed in order to help older workers who lose their jobs to find new employment. Skilled migration: Germany has launched an initiative to tackle a nationwide shortage of computer experts by granting 20,000 new work permits to skilled foreigners. Vocational training: The Federal Ministry of Education and Research funds, directly or indirectly, a considerable number of the programs to support students and young scientists. The demand for scientifically and technically trained labour in Germany will continue to rise. The situation is exacerbated by the fact that an above-average number of scientists in Germany will retire over the next few years. One program is the Initiative for Excellence, which promotes top-class university research in the scientific field. 1.9bn will be made available to the institutions of higher education within the framework of the Initiative for Excellence. The federal government will contribute 75% of this sum. Employment laws Employment contracts: Employees are entitled to a summary of the contract signed by the employer, and can claim minutes setting out contractual conditions such as the date on which the employment began, the place of employment, a brief job description, remuneration, working time, duration of holiday time and applicable notice periods. These minutes must be signed by the employer. Conditions of employment: The conditions of employment are mainly based on an individual employment contract; or a collective bargaining agreement or a shop agreement (entered into by the employer and the works council); or a regularly repeated practice within the enterprise. However, all applicable mandatory provisions of German law must be observed, in particular the following: The probationary period is limited to a maximum of the first six months of employment (with a minimum notice period of two weeks) A term in an employment contract may only be limited to a fixed duration if the employee is newly employed and has never been employed by the employer before (in which case there is a maximum fixed duration of 24 months) or if this limitation is justified by an objective reason (eg seasonal work) There is a maximum working day of eight hours - or 10 hours exceptionally - provided an average of eight hours each working day (Monday to Saturday) is not exceeded within a period of six calendar months or 24 weeks The usual German work week is 38.5 hours, and many employers close early on Friday afternoons. The law requires 18 working days of annual leave, but some companies offer much more than that. Unpaid leave is also permitted under certain circumstances There is no legal obligation to provide for an additional company pension scheme, but if the employer does provide for such a scheme, the mandatory provisions of the Law on the Improvement of Company Pension Schemes must be observed Termination of employment: A termination with immediate effect requires good cause such as the employee having committed a serious breach of contractual duties or a criminal offence. If an employee resigns, the law requires them to give four weeks' notice. Maternity leave: German law is very generous when it comes to maternity and paternity leave. Mothers are allowed six weeks' leave at full pay prior to the child's birth and eight weeks at full pay afterwards. In the case of a multiple birth, 12 weeks' paid leave is allowed. Either parent in both cases is then allowed up to three years of unpaid leave to stay at home with the child. Tax and contributions Any salary payments are subject to tax and social security contributions (pension, unemployment, health and nursing care insurance), which are paid respectively to the tax office or the social security institutions, along with the employer's own social security contributions. The employer and the employee each pay half of the contributions, and employers must pay their share in addition to the salary. Tax brackets: From SGD0- SGD7,664: 0%

From SGD7,664-SGD12,739: 15-23.9% From SGD12,740-SGD52,151: 23.9-42% Beyond SGD52,152: 42% Corporate tax The federal government recently reached an agreement on the reform of the corporate tax rate and will come into effect as of January 2008. The reforms propose a reduction in the tax burden for businesses from 39.7% to 28.9%. Social security Regular employees are liable for the following individual social insurance, health insurance, pensions insurance, unemployment insurance, and health/nursing care insurance. Health insurance is 6-7% of taxable income; pensions insurance is 9.65 %; unemployment insurance is 3.25 %; and health/nursing care insurance is 0.85% of taxable income. In total, this is around 21% of taxable income. Minimum wage There is no such thing as an overall minimum wage defined by law. There are special regulations and agreements within certain sectors, eg construction companies are obliged to pay their workers a minimum hourly wage per an agreement between unions and employers. The position of trade unions is stronger than in most other countries. Every industrial sector has its wage agreements and most companies pay accordingly. Largest employers 1. Deutsche Post, Germany - 502,545 2. Siemens Group, Germany - 461,000 3. Daimler Chrysler, Germany - 382,724 4. Volkswagen Group - 344,902 5. Metro AG - 204,076 6. Allianz Worldwide - 177,625 7. BMW AG - 105,798 8. Bayer Group - 93,700 9. Deutsche Lufthansa - 92,303 10. RWE Group - 85,928 Case study: HR at Daimler Chrysler Germany The HR strategy at Daimler Chrysler Germany has been applied to the company's operations worldwide. The company has endeavoured to define uniform core challenges for its HR departments all over the world, not just its German counterparts. The core challenge has been identified as 'outstanding performance and productivity'. Important issues in this area focus on the reduction and limitation of labour costs and the maintenance and enhancement of employee productivity and competitiveness. In 2004, Daimler Chrysler reached an agreement between the Group's management and the General Labour Council, titled the Safeguarding the Future 2012 agreement. Through this, Daimler Chrysler plans to achieve the following goals: improving competitiveness, strengthening innovation power, increasing employee flexibility and safeguarding jobs in Germany. Other HR achievements and incentives, both global and local, are: Progress in healthcare and workplace safety: In 2005, the Chrysler Group received an award from the US Academy for Occupational and Environmental Medicine in recognition of its innovative healthcare and workplace safety programs and the significant decrease in work-related injuries at its production locations.

Diversity of the workforce: In order to boost its competitiveness, the company deliberately employs men and women with different areas of expertise, types of experience and points of view. Women are traditionally under-represented in technology-oriented companies, especially in Germany. The company's Global Diversity Council has taken action to help remedy this situation. In an initial step, it set a target corridor for each division regarding the proportion of women in management positions, with the aim of achieving these targets by 2008. Training programs: In 2005, approximately 2,600 men and women completed their traineeships at Daimler Chrysler locations in Germany. In addition, 472 graduates entered junior management training programs. Facts and trivia After England, Germany was the first European country to pass labour laws. Chancellor Bismarck's (18151898) main goal was to undermine the Social Democratic Party of Germany (SPD) by adopting a variety of social reforms to appease the working class. Although there are no state-mandated minimum wages, something similar exists. Everyone has a right to Sozialhilfe (social welfare). Whether you are employed or not, you always have the right to a (very limited) income. If you work for less, you will get the rest from the local social welfare administration, run by the city or county government. Generally, Germany has a persistently patriarchal family structure and work environment. Despite significant gains, discrimination remains in united Germany. Income inequalities persist: a woman's wages and salaries range between 65-78% of a man's for many positions. In most fields, women do not hold key positions

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